MGA market will rebound in 2020 – Clyde & Co

International law firm Clyde & Co has released 21 predictions about the future of the insurance industry for 2020. Among these are predictions that the MGA market will rebound in 2020 as Lloyd’s reforms take root; arbitration clauses will continue to dominate in reinsurance contracts; and insurtech collaboration between insurers and healthcare providers will transform healthcare experience.

Discussing her prediction that the MGA market will rebound in 2020 as Lloyd’s reforms take root, Jennette Newman, partner, Clyde & Co, London, said: “The UK's £4.7 billion MGA market will become an even more popular feature of the London market in 2020, even as competitive and regulatory pressures increase.

“Established players that can survive the increased scrutiny and pressure to perform will emerge from 2020 as bigger, better run and more profitable. New start-ups, or those without a track record, may find themselves out in the cold as capacity is realigned.

“Both carriers and established MGAs will be keen to explore the new opportunities opening up as a result of planned reform in the Lloyd’s market. The syndicate in a box proposals, for example, could dramatically reduce entry costs averaging around £20m over the traditional three-year incubation period for new syndicates. With 80 applications already open following the lead set by Munich Re, the prospects here look good. The Lloyd’s risk exchange is another exciting development clearly targeted at reducing the cost of standard, commoditised or low complexity coverage.”

She added that the key to success in the next 12 months will be the ability of MGAs to move fast to take advantage of these new structural opportunities.

Discussing his prediction that arbitration clauses will continue to dominate in reinsurance contracts, Michael Knoerzer, partner, Clyde & Co, New York, said that insurers will consider arbitration as an effective strategy in 2020.

“Insurers and insurance attorneys have a love-hate relationship with arbitration in insurance and reinsurance contracts,” he said. “Generally, they love arbitration about as much as they love the last result in the last arbitration they had.

“Having said that, arbitration is favoured over court litigation in reinsurance contracts and we will continue to see this in 2020. One reason for this is arbitration clauses also are more likely than not to be found in insurance contracts where the parties are companies from different countries. Arbitration under a neutral arbitration framework, perhaps with special rules about the neutrality of the arbitration panel, provides comfort to both parties that there will not be a ‘home court advantage’ for either party.”

On her prediction that insurtech collaboration between insurers and healthcare providers will transform the healthcare experience, Joyce Chan, partner, Clyde & Co, Hong Kong, said: “Insurtech is thriving – evidenced by the $8.5 billion insurtech investment raised in the last five years. But as the insurtech market becomes more saturated, players are diversifying into niche areas to gain a footing.

“In the healthcare space, consumers are taking a more active role in managing their health and wellness. Yet the healthcare industry has been behind other industries in terms of uptake of consumer technology – we predict that this gap will narrow in the coming year. In 2020, we expect significant growth in collaboration between insurers and healthcare providers to develop digital products that will integrate their offerings.”

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